City Chic Collective Limited (ASX:CCX) shares have had a really impressive month, gaining 29% after a shaky period beforehand. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 75% share price drop in the last twelve months.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about City Chic Collective's P/S ratio of 0.4x, since the median price-to-sales (or "P/S") ratio for the Specialty Retail industry in Australia is also close to 0.8x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for City Chic Collective

What Does City Chic Collective's P/S Mean For Shareholders?

City Chic Collective could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on City Chic Collective will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The P/S?

The only time you'd be comfortable seeing a P/S like City Chic Collective's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 29% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 51% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 5.7% per annum during the coming three years according to the three analysts following the company. With the industry predicted to deliver 5.7% growth each year, the company is positioned for a comparable revenue result.

In light of this, it's understandable that City Chic Collective's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Key Takeaway

City Chic Collective appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our look at City Chic Collective's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

You should always think about risks. Case in point, we've spotted 3 warning signs for City Chic Collective you should be aware of, and 1 of them is a bit concerning.

If these risks are making you reconsider your opinion on City Chic Collective, explore our interactive list of high quality stocks to get an idea of what else is out there.

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